Case Study: Banc-Zero New Product Development

You must be sure that you provide answers for all these questions or issues:

1. What are Banc-Zero’s credit policies?

2. What type of clients are they trying to attract?

3. Who are Banc-Zero’s competitors?

4. Describe the difference between the over counter derivatives and

standardized traded derivatives

5. Describe how BancZero uses derivatives in its trading and asset/liability

management operations

6. What is the role of Banc-Zero’s Risk Management Group and who is the head

of the group?

7. To demonstrate your understanding of the new product approval process

you need to examine and comment on: Figure 2-The New Product Approval;

Figure 3-New Products Manager; Figure 5- Mexico City Office Organizational

Structure

2

8. What are Banc-Zero’s risks in the Currency Swap with Company A?

9. How could BancZero hedge some of the risks with Company A and what are

the limitations of doing so in the Mexican Market?

10. What will be Banc-Zero’s compensation (fees, etc.) if it were to do the swap

with Company A?

11. Who are Fernando Manzanilla and Ricardo Eliozondo?

12. What are some of the things that must take place before the swap project is

approved?

13. Describe the problem with Banc-Zero’s pricing and valuation model and the

swap project?

14. What were the results of the “stress test”?

15. What will be the problems in modifying the product to meet the current

stress test standards? What about changing the stress test standards?

16. What is the concern of Fernando Manzanillaj with the results of the stress

test?

17. Assume that you are the Head of Risk Management in New York: Would you

approve this product? Give detailed reasons for your answer.

18. How would you improve Banc-Zero’s process for new products? How would

you change the sequence of activities?

19. What Have I Learned From this Case?